Security Selection

This image uses graphic elements and text to communicate the following:

• The steps in Fisher Investments’ investment decision-making process
• The questions the investment team seeks to answer at each step
• The accompanying information they use to answer those questions and arrive at security decisions.

Graphically, a funnel dominates the left side of the image. The funnel is divided into a darker top-third and a lighter bottom two-thirds. Questions and bullet-point lists populate the right-hand side of the image, connected with lines to text inside the funnel.

The upper portion of the funnel shows that the top-down investment process begins with analysis of country, sector and thematic weights to arrive at a list of potential investable securities. A label reading “Country, Sector, Thematic Weights” tops the funnel. Along the side, the label reads “Prospect List Definition.” 

The first step in the funnel is “Micro Portfolio Exposures.” It includes three points:

• Country/Sector Intersections
• Global Industry/Sub-Industry
• Capitalization/Valuation Targets.

At this step, the investment team seeks to answer the question “Which categories and characteristics are appealing?”

The next step is “Liquidity and Solvency Screen,” which helps the investment team determine “Which companies have liquidity or insolvency risk?”

The final step of the “Prospect List Definition” portion of the funnel reads “Outlier Analysis.” At this step, the investment team asks, “Are any companies inconsistent with the category or peer group?”

The lower portion of the funnel (Security Selection) comprises five steps. The first step is “Strategic Attribute Identification.” The question answered at this point is “What are the company’s competitive advantages?” A connected bullet-point list details examples of these strategic attributes:

• Brand Names
• Turnaround Story
• Strong Product Pipeline
• Market Share
• Barriers to Entry
• Niche Market
• Cost of Production
• Consolidator
• Proprietary Technology
• Restructuring Plan
• Balance Sheet Strength
• Strategic Partnerships
• Innovator
• Regional Advantage
• Other Industry-Specific Attributes

The second step in the Security Selection portion of the funnel is “Strategic Attribute Preferences.” At this step, the investment team seeks to answer the question “Which strategic attributes best leverage our top-down views?”

The third step is “Attribute Execution Analysis.” Here, the investment team asks, “How is the company taking advantage of its strategic attribute?”

The fourth step is “Relative Valuation Analysis.” The question accompanying this step is “Has the market fully discounted the company’s advantages in its share price?”

The last step is “Risk Assessment.” The accompanying question is “What are the material risks to the equity?” Next to the question are examples of these “Red Flags,” broken out into three main categories: Operational; Environmental, Social, and Governance (ESG); and Market and Security.

• Operational
  • Customer Concentration
  • Regulatory and Legal Risks
  • Sole Source Supplier
  • Executive Departures
• ESG
  • Environmental Liability
  • Labor Relations
  • Corporate Stewardship
• Market and Security
  • Equity Ownership Concentration
  • Pending Corporate Actions
  • Accounting Irregularities
  • Market Access

At the bottom of the lower portion of the funnel is the label “Security.”